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Although 2020 was a bit different than previous years due to COVID-19, one thing that remained constant was the impact of a rapidly changing climate on our communities and economy. 2020 was another record-breaking year for climate-related disasters, whether extreme heat, hurricanes, or wildfires. These events are placing significant stress on our economy and industry resulting in reductions in profitability and earnings in companies. Beyond the physical risk, there is the transitional risk where fossil fuel-dependent companies are losing investments or possibly shuttering as the economy moves to decarbonize. …


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Much of my work entails a good bit of reading on the United States’ electric power system. I mainly focus on the resilience of our power system to major natural disaster events. There is a lot of good work published, primarily from the Department of Energy, that points to the susceptibility of our power system to natural disaster events, whether that is a chronic event such as extreme drought, or more acute events, like hurricanes. The National Academy of Science came out with a nice study, “Enhancing the Resilience of the Nation’s Electricity System,” looking at a variety of risks to our power system including extreme weather risk due to climate change, physical risk, i.e. people shooting at substations, cyber-risk and electromagnetic risks from solar storms. The NAS study came out after Hurricane Harvey and I had an opportunity to provide testimony on this during a US House of Representatives Committee on Science, Space, and Technology meeting in 2017. …


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During the most recent Presidential Debate, Trump thought he had Biden. He goaded Biden into saying that he was looking to phase out fossil fuels. Trump looked pretty smug. He thought he had an opportunity, a turning point of the campaign that would swing the outcome in his direction. The voting population, particularly in Texas and Pennsylvania would see that Biden is looking to shut down the oil and gas business and decimate the economy and their communities. However, a week later, the polls have not changed in Trump’s favor. Pennsylvania has not swung to Trump. Why would this be the case? Aren’t Texas and Pennsylvania large oil and gas producing states that rely on this industry for much of their economic prosperity. Yes, this sector is a key economic engine. However, unless you exist in Trump’s echo chamber you see the writing on the wall. A poll taken right after the debate indicates that 57% of likely voters either support or strongly support the clean energy transition. The transition is already happening. …


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“Green Jobs not Job Cuts” by John Englart (Takver) is licensed under CC BY-SA 2.0

Oil and gas production is slowly picking back up but indicators suggest that bringing it back will be difficult. Particularly as we see fossil fuel demand hitting a plateau somewhere around 2030–2035, oil and gas companies will be looking to transition to “clean energy” companies or will be downsizing, merging, or closing their doors. Regardless, this means a radically different employment skills landscape than where we are now.

The energy transition speeds up and there is less general resistance if there are jobs waiting for those coming from the oil and gas industry.

Our policymakers and decision-makers need to look honestly at the energy economic reality in front of them. There are a lot of roustabouts, derrick operators, rotary drill operators, truck drivers, etc. that are highly skilled and looking for good jobs. We need to make sure that they have the tools and resources to make that transition. …


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Hurricane Laura just hit Louisana and Texas with 150 mph wind. With warming waters and more moisture in the atmosphere, this may be more common. We are seeing indications in the climate models that hurricanes may not become more frequent but are likely to be more intense. As expected, with Laura, there are widespread power outages; approaching 1 million. Even areas that were not touched by the actual hurricane are now out of power. A good bit of the population west of the hurricane in the electric utility, Entergy’s territory is without power at this time(see image below as of 8/27/20). This appears to be due to a large transmission line tower going down in Beaumont. This town was more in the direct path of the hurricane. However, due to the interconnected nature of our grid, localized disruptions can have widespread impacts. So even if you are 100+ miles away from the actual event, things can go wrong. …


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There is much discussion on a green stimulus. A federal monetary and programmatic infusion that would kickstart the economy while at the same time work toward decarbonization of our energy system. Trillions of dollars could be spent. An example may include H.R. 2, the Moving Forward Act, aka INVEST in America Act; — $1.5 trillion. This is a massive climate-friendly infrastructure bill, passed in June 2020. This bill looks at greenhouse gas mitigation and climate resilience. It includes:

  • Strategies to reduce the climate change impacts of the surface transportation system by conducting a vulnerability assessment to enhance its resilience;
  • A path toward zero emissions from the transportation sector by cutting carbon pollution, investing in public transit and the national rail…


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A recent survey by FM Global of 150 CEOs finds that 58% of CEOs admit their company is not fully prepared for climate risk and 66% feel they have somewhat to no control over climate risk. Almost 90% feel they are somewhat to significantly exposed to climate-related risks. Their greatest concern is drought, hurricanes, and wildfires.


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Growing Demand By Investors and Regulators for Climate Stress Testing and Scenarios

Investors and shareholders are demanding a greater focus by companies to assess their climate risk. Phillips 66 was the most recent major announcement where shareholders voted to have the company consider is climate risk along the Texas Gulf Coast. A specific emphasis was given to public health impacts that may occur due to chemical releases brought on by storm surge, flooding, and hurricanes.

The wave is coming for greater climate risk transparency. As I have written before there is global activity among regulators, investors, and asset managers demanding greater transparency regarding climate risk. Further, ongoing discussions are happening at the US Fed and the Commodity Futures Trading Commission’s (CFTC) Market Risk Advisory Committee (MRAC). The MRAC has recently closed public comment for the Climate-Related Market Risk subcommittee specific to figuring out how to assess and disclose climate risk. …


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Image from the Disappearing Oasis — Contrast VR and European Forest Institute

In March, we all became painfully aware of how unprepared we are as a society to deal with something like COVID-19. Scientists and emergency response officials had warned about something like this. Response plans had been made but discounted and ignored. Resources were available but mishandled. Now we suffer the consequences as a society.


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Much of March, rightfully so, has been focused on Covid-19. This is a clear and present danger to our well-being and health. As we get this under control, which looks to be another couple of months, we should not take our eye off of a more significant danger. Climate change has and will continue to result in significant extreme weather events. These extreme weather events wreak significant economic damage and community disruption. Covid-19 is a significant public health crisis, but unlike climate change, it is not impacting our food and water supply, nor our infrastructure. …

About

Gavin Dillingham, PhD

Director of Clean Energy at the Houston Advanced Research Center. CEO of Pythias Analytics — Optimizing Climate Risk Decision Making — www.pythiasanalytics.com

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